Analysis

Larry Ellison championed the idea of thin-client devices connected to centralized data and processing from the mid-90s to around 2000, much to the derision from the folks in Redmond. He’s been vindicated, except for one thing: while Ellison’s network computers were stripped-down desktops connected to Oracle databases; today, network computers have turned out to be smartphones and netbooks. Still, Ellison’s idea represented the groundswells of a tidal shift that’s rocking both the IT industry and the mobile communications industry.

What happens when you promise end-users a persistent connection to data, applications and services regardless of the device they’re using?

Mobile cloud computing aims to deliver just such a promise. Mobile access to popular web-based services such as Facebook and Gmail, combined with next-generation smartphones like the iPhone, Palm Pre and Android devices, is driving broad adoption of mobile data. Indeed, the combination of smartphones, Apple’s mobile app store, and mobile cloud computing appears to be rescuing the traditional mobile data market from itself.

The blurring of the lines separating fixed and mobile broadband has accelerated strongly across geographies. In the U.S. market, Pew Internet and American Life reported in July 2009 that fully 56 percent of Americans had accessed the Internet wirelessly, with 32 percent of the population having done so with a handheld device such as a phone, PDA, iPod, Kindle or other connected consumer device.

These numbers are encouraging for mobile Internet and, by extension, mobile cloud computing (MCC). Yet the irony facing both mobile telecoms and IT is that neither industry controls the secret sauce driving MCC. To be sure, mobile carriers are selling more mobile data plans, not the least because more users want mobile access to their social networks and other MCC-based services. These services are voracious consumers of storage, processing and content distribution resources. The IT industry benefits from increased demand for these resources.

However, the center of economic gravity is shifting. Historically, access to the mobile network was the service. What happened after the user paid the network gatekeeper (the mobile carrier) for access was largely immaterial. It was the volume of consumed bits that mattered. However, as users have expanded the uses for those bits, what the user does in a given session becomes fundamental to how much the service provider can charge the user or a third party (e.g. an advertiser). These MCC service providers base their business on the value of the service being accessed rather than the volume of the mobile bits being served.

Of course, the rub comes when delivering the value proposition of a MCC service requires a huge volume of mobile bandwidth. This is the sticking issue for all parties concerned: who will make the massive, required investment in mobile broadband infrastructure in order for MCC to reach its potential?

To date, the vast majority of MCC providers have sidestepped the mobile broadband component by letting the end-user deal 100 percent with the mobile bandwidth cost. But it’s also true that as MCC providers increasingly deploy media and bandwidth-hungry services, it will be a hard sell to wring out the billions of dollars necessary to build out mobile broadband by consistently screwing the network operator.

In the meantime, we can expect a lot of previously unthinkable tie-ups (e.g. Nokia and Intel) between IT industry players and mobile players in the short-term. This is because MCC represents one of the few growth areas in a difficult global economy. In heavily penetrated mobile markets such as Europe, parts of Asia, and North America, the economic engine for mobile telecoms has shifted away from coverage and penetration toward usage, much of it now drawn from mobile data. Simultaneously, the IT industry must respond to a secular shift by the mass-market to employ the web, rather than the PC, as the main platform for accessing and interacting with content, applications and services.

Emerging economies conceivably offer even more MCC growth potential. By most accounts, there will be over 1 billion people achieving middle class status in BRIC (Brazil, Russia, India, China) and other developing regions by 2015. These new consumer and professional populations with disposable income are making relationships with global brands, services, and applications, often for the first time. For huge populations, mobile access is the Internet.

Thus, it’s likely that the mobile, IT and MCC sectors will continue their current marriage of convenience to attack a rare convergence of both short-term and longer term opportunity. However, in the process of adapting to an Internet that’s becoming more global, mobile and web-based by the day, the mobile and IT industries will be forced into new ways of doing business.

The recent kerfuffle surrounding the attempt by Google Voice to be included in Apple’s App Store is simply an opening shot of a larger struggle. As mobile communications goes further down the all-IP road, the industry becomes increasingly governed by Internet economics, which hold that voice is just another type of data that should be part of a basic access charge rather than a separately charged service. It’s not surprising that the mobile industry — being reluctant to slit its throat for the greater good — sees things differently.

Regardless of efforts to lash it to historic business models, MCC will force the mobile and IT industries to migrate to an Internet future that is more global and service-driven rather than technology-, product- or access-driven. Now that a fast-growing cohort of consumers and enterprises worldwide have tasted what it’s like to have mobile access to popular web-based services, all three industries will need to work closer with each other whether they like it or not.